(Agrimoney) – US corn yields will fall short of government forecast, unless the crop enjoys ideal cool and dry weather for the rest of the summer, said Morgan Stanley, voicing supportive comments on corn prices.
Although an improving weather outlook leaves US corn headed for above-average corn yields, the bank sees them below the US Department of Agriculture forecast.
“The USDA’s estimate would require ideal weather going forward,” said the bank.
Lower stocks, production
Morgan Stanley forecast this year’s average US corn yield at 164.6 bushels an acre, assuming normal weather for the rest of the season, while cooler and drier weather could help yields up to 166.7 bushels an acre.
This leaves Morgan’s ideal weather scenario still fractionally behind the 166.8 bushels an acre forecast by the USDA.
The outlook leaves Morgan Stanley downbeat on corn production in the US for 2015-16.
The bank forecasts the coming US corn harvest at 13.349bn bushels, below the USDA forecast of 13.530bn bushels.
Morgan Stanley also estimates corn stocks at the start of the coming season in September at 1.732bn bushels, below USDA estimates of 1.779bn bushels.
‘Modest upside’
Morgan Stanley expects corn to outperform the forward price curve, noting that corn is the only grain that is likely to be in deficit, both in the US and globally, over the 2015-16 marketing year.
Morgan Stanley sees prices remaining “between $3.80-4.75 a bushel in the near term, above its lows from last month, with modest upside above its recent high if yields disappoint”.
The US corn crop was initially in very good condition, in line with that seen for last year’s bumper crop.
But a spell of very wet weather across key Midwest areas over May and June led to a decline in condition.
Prospects improve
However, as weather in the Midwest turns drier, crop prospects have recovered.
“Yield potential has risen since the start of July,” Morgan Stanley said.
“With the critical month of July more than halfway done, above-trend yields are likely,” the bank added.
Noting normal temperatures forecast for the coming week, Morgan Stanley said that “dryness in the eastern and light rain in the western Corn Belt are expected to help yield prospects”.
The better weather outlook means that Morgan Stanley believes that corn yields will still come in above the 20-year trend of 161.9 bushels an acre.
